As Construction Costs Rise, Some Developers Are Saving By Cutting Out The Middleman
Two of the biggest obstacles for developers today are a shortage of labor and the rising cost of construction materials. Many developers are finding that taking the intermediaries out of construction purchasing can address both challenges.
The familiar sourcing model for getting materials from a manufacturer to the job site is a cascading waterfall of third parties: a supplier to a broker, a broker through an intermediary and so on until the final end user.
“The process of purchasing construction materials through a series of middlemen arose a long time ago, when information was scarce and meeting face-to-face was the only way to make deals” said Steven Levin, Mega Supply Pro senior vice president of business development. “But today, with information so readily available, this legacy system leads to redundancies, delays, waste and inefficiency, all of which accumulate and can harm a project overall.”
The old system bogs down general contractors and developers with extra paperwork, financial terms to navigate and the logistical staffing hiccups that come with a drawn-out timeline, Levin said. It also leads to extra cost: When it takes multiple entities to get materials from a manufacturer to a job site, each one must add their markup to the final price.
But now that technology offers new and better ways to undertake this process, Levin said, the industry needs to catch up. Founded in 2012, Mega Supply Pro, a woman-owned manufacturer-direct wholesaler of construction materials and finish products based in Philadelphia, is working to reimagine the whole business.
“We’re using new technologies and innovative processes to streamline supply chain coordination and essentially serve as a one-stop-shop for direct procurement and supply delivery," Mega Supply Pro President Tanya Sharpan said. “This is especially pertinent for our clients in multifamily and mixed-use development.”
Jacob Roller, a Philadelphia developer, said that working with a direct-from-manufacturer supplier has helped him speed along work on his multifamily projects. Rather than searching hundreds of websites and calling vendors and logistics call centers, Roller was able to use Mega Supply Pro.
“The uncertain nature of the renovation scope meant I couldn’t use a general contractor. I had to sub out all the work myself,” Roller said. “Of course, I didn’t have the time to run to Home Depot all day, nor to spend valuable hours researching and sourcing the Class-A finishes and details I needed.”
For customers like Roller, a supplier who can also serve as a design center streamlines the process and saves time and cost — this is another way that Mega Supply Pro wants to change the paradigm. It provided all of Roller’s building supplies, offering solutions from a database of domestic and foreign producers as well as custom solutions, from doors and windows made locally in Pennsylvania to European mirrors and vanities made in boutique design studios in Italy and Spain.
Levin said two other value adds for clients are short-term storage capabilities and coordination of all deliveries.
“Unfortunately, most of us are painfully familiar with dreadful scenarios where all trucks show up to the job site at the same time, or when the labor team is there but the needed delivery isn’t,” Levin said.
These mishaps, often due to weather and unforeseen circumstances, end up costing the industry significant losses in time and capital, Levin said. But operating independent storage facilities allows the company to order products in advance and deliver them on the timeline each client requires.
“We take over the entire purchasing process at no extra cost to developers or general contractors and [subcontractors]. We work within their budgets and their timelines and provide oversight across the entire process,” Levin said. “That wasn’t possible before, but it’s possible now.”
Mainly, Levin said, the company wants to provide an ecosystem where construction professionals can spare themselves these unnecessary logistical headaches and focus on what they do best: construction.
This feature was produced in collaboration between Bisnow Branded Content and Mega Supply Pro. Bisnow news staff was not involved in the production of this content.